The ill-timed advice shows that even the largest banks and most-successful investors failed to anticipate how government actions would influence markets. Unprecedented central-bank stimulus in the United States and Europe sparked a 16 percent gain in the S&P 500 including dividends, led to a 23 percent drop in the Chicago Board Options Exchange Volatility Index, paid investors in Greek debt 78 percent, and gave Treasuries a 2.2 percent return even after Warren Buffett called bonds "dangerous."
"They paid too much attention to the fear du jour," said Jeffrey Saut, who helps oversee about $350 billion as the chief investment strategist at Raymond James & Associates in St. Petersburg, Fla. "They were worrying about a dysfunctional government in the U.S. They were worried about the euro quake and the implosion of Greece and Portugal. Instead of looking at what's going on around them, they were letting these macro events cause fear to creep into the equation."
The market value of global equities increased about $6.5 trillion last year as the MSCI All-Country World Index returned 17 percent including dividends. The Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index of government debt returned 4.5 percent.
Money managers who bet against the conviction of European leaders to hold together the 17-nation currency union missed out on some of the best investment opportunities as the euro strengthened about 9.4 percent from a July 24 low against the dollar.
"There really is only one 'worst trade' " of the year, said Michael Shaoul, chairman and chief executive officer of Marketfield Asset Management L.L.C. in New York, which oversees about $4.4 billion, "and that is the 'euro-crisis' trade."